Leading packaging and paper manufacturer International Paper Company (IP) recently increased its quarterly dividend by 14% year over year to 40 cents per share. The fourth quarter 2014 dividend is payable in cash on Dec 15 to shareholders of record at the close of business on Nov 17.
Based on the closing price of $48.38 on Sep 9, 2014, the proposed dividend offers a yield of 3.31%. A steady dividend payout is part of the long-term strategy of International Paper to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
This is the third consecutive double-digit dividend hike for International Paper in three years. The current dividend increase further reflects the inherent strength of International Paper’s business and due diligence of management to generate long-term profitability and sustainable free cash flow.
Historically, International Paper has consistently returned significant cash to its shareholders through dividends and share repurchases. In July this year, the company modified its existing share repurchase program to enhance shareholder value. Under the new share repurchase program, International Paper doubled its share authorization tally to enable repurchase of an additional $1.5 billion worth of stock over a period of time. The additional shares over its existing $1.5 billion share repurchase authorization could be repurchased through a slew of open market transactions.
Headquartered in Memphis, TN, International Paper has manufacturing operations in North America, Europe, Latin America, Russia, Asia, and North Africa. The company employs approximately 65,000 people and is strategically located in more than 24 countries serving customers worldwide.
Moving ahead, the company plans to focus on debt reduction opportunities for improving its balance sheet and reducing effective cost of debt. International Paper’s best-in-industry talent pool and expertise are expected to offer optimal and affordable solutions, thus rendering an edge over its peers. International Paper expects to meet its capital expenditures, service existing debt and meet working capital and dividend requirements during 2014 through current cash balances, cash from operations, and existing credit facilities.
International Paper presently has a Zacks Rank #3 (Hold). Other players in the market worth mentioning include Neenah Paper, Inc. (NP), Mercer International Inc. (MERC) and Rexam plc (REXMY), each carrying a Zacks Rank #2 (Buy).
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